Autonomous Pix Nubank

This report is prepared solely for the use of Ailime Freitas
5 July 2023 Nubank (NU US) Banks
Price: USD 7.96

Neutral
Price Target: USD 7.70
NUBANK Geoffrey Elliott, CFA

+44 207 776 3302
PIX Credito - Good for Nu gelliott@autonomous.com
Renato Meloni
+1 212 823 2733
rmeloni@autonomous.com
We profile Nubank's PIX Credito offering, which allows customers to finance PIX money
transfers using their credit card limit. The user experience compares favorably with PIX credit
NU US Key Data
offerings from other banks. We therefore expect PIX Credito, and other new products linking
installment lending to card limits, to remain an important driver of growth. That said, we are 2023E 2024E 2025E
nervous about potential for increased credit risk as the product grows. Refreshing our model, Div Yield (%) 0.0 0.0 0.0
we raise our adjusted EPS estimate by 4% in each of 2024E and 2025E to $0.33 and $0.45
Adjusted P/E (x) 44.4 24.2 17.6
respectively. We rate Nubank Neutral, increasing our price target from $6.10 to $7.70.
P/TBV 7.7 6.1 4.7
• Over the past year, Brazilian banks have begun to integrate credit offerings with the Reported P/E (x) 56.4 27.7 20.0
PIX instant payments platform. These offerings typically resemble personal loans, with P/B (x) 6.9 5.6 4.4
installments deducted from the client's checking account each month. However, Nubank's
Source: Autonomous Research, Bloomberg
PIX Credito solution makes use of the customer's credit card limit, with installments
included in the monthly credit card bill, which we believe is popular with clients.
Price Performance, 1YR
• Alongside similar products (such as paying boletos in installments), PIX Credito has
$9
contributed to a significant increase in the proportion of "interest-bearing installment" 130000
125000
$8
balances within Nubank's Brazilian credit card portfolio. These accounted for 7.7% of 120000
$7
balances as of June 2022, immediately prior to PIX Credito's launch, but had increased to $6
115000
110000
15.8% as of March 2023. We estimate PIX Credito (and similar products not tied to card $5
105000
spend) accounts for balances of ~US$900mn, or 6.4% of Nubank's loan portfolio and $4
100000
95000
14.2% of total interest-bearing balances. 07/22 10/22 01/23 04/23 07/23
NU US Ibovespa Brasil Sao Paulo Stock Exchange Index
• Among a small sample of Nubank clients who we asked to simulate a PIX Credito transfer,
implied annual interest rates varied between 48% and 189% depending on the individual
and the number of installments. While the range is wide and our sample is very small, we
believe that PIX Credito APRs are typically more comparable to those on personal loans
(92% for the industry) than to the higher rates on overdraft.
• In some ways, PIX Credito resembles an overdraft. After all, the most obvious reason to use
PIX Credito is when a client needs to make a transfer and doesn't have sufficient funds.
However, we believe that the PIX Credito will compete with personal credit as well given
its ease-of-use and competitive interest rates. However, the risk profile of new lending will
be key to the product's success. We understand that initial data has been encouraging,
although this could deteriorate as adoption increases, especially if growth is driven by
marginal borrowers.
See the Disclosure Appendix of this report for required disclosures, analyst certifications and other important information.
First Published: 05 Jul 2023 10:00 UTC Completion Date: 04 Jul 2023 11:55 UTC
PIX Credito - Good for Nu 5 July 2023
PIX - A brief recap

PIX is a free instant payment platform, developed and operated by the Brazilian Central Bank.
PIX launched in November 2020 and was quickly and widely adopted in Brazil. As shown
below, PIX accounts for 13% of all payments volume in Brazil (based on a broad definition
including virtually all non-cash payments involving individuals, business and government).
Chart 1: PIX has rapidly gained popularity among Brazilians

40% PIX, % of total payment transactions (quantity) PIX, % of total payment volume
35%
30%
25%
20%
15%
10%
5%
0%
4Q20 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22 4Q22 1Q23
Source: Brazilian Central Bank, Autonomous Research
As shown in Chart 2, PIX transactions are dominated by P2P and B2B transfers, which most
likely reflects share taken from the TED and DOC legacy wire transfer systems. As shown
below, B2B transfers accounted for 39% of PIX volumes in May, while P2P accounted for
35%.
Chart 2: PIX is dominated by P2P and B2B transactions

P2B transactions 1%
were 11% of the total
P2B
11%
B2P B2B
13% 39%
P2P
35%
P2P and B2B

transactions
represented 75% of
the total PIX volume
1% remaining includes G2G, G2B, B2G, P2G and G2P; As of May 2023
Source: Brazilian Central Bank, Autonomous Research
While P2B payments accounted for only 11% of PIX transfers in May, volumes have
nevertheless surpassed debit card. As shown below, in 1Q23 P2B PIX volume was R$328bn,
significantly higher than debit card TPV of R$235bn, but lower than credit card TPV of R
$539bn.
2
Chart 3: PIX P2B volume was higher than debit card TPV in 1Q23
R$ 600bn
R$ 500bn
R$ 400bn
R$ 300bn
R$ 200bn
R$ 100bn
R$ 0bn
Credit card PIX (P2B) Debit card Pre-paid card
Source: ABECS, Brazilian Central Bank, Autonomous Research
Since PIX was launched, the BCB has introduced several new features, which we detail
below. However, the development of PIX credit offerings has largely been driven by the banks
themselves.
• QR code payment: Enables payment via QR code, in cases where the recipient doesn't
have an adequate internet connection. This function allows the payer to generate a QR
code for payment;
• PIX Withdrawal (PIX Saque) and PIX Change (PIX Troco): Enables allows users to
withdraw cash at commercial establishments (such as stores and restaurants) which are
registered with the Central Bank. The user simply needs to transfer via PIX the amount he
or she wants to withdraw to the merchant and receives the cash. PIX Troco is a variant of
this allowing the user to top up a purchase transaction and receive the excess as cash.
• PIX Charge (PIX Cobrança): Similar to an invoice, allows users to request a payment at a
future date, with pre-defined installments, interest and late fees (when applicable).
Introducing PIX Credito

In 2022 many banks started offering PIX payments using credit (called PIX Credito by Nubank
and PIX Parcelado at some other banks, for example). The transaction works the same as
a normal PIX from the point of view of the recipient: the money is available in their account
instantly (and they won't know that credit was used). For the payer, however, the experience
varies significantly between banks.
Most banks' PIX credit offerings closely resemble personal loans, with installments deducted
from the current account balance each month. At Bradesco, the offering resembles an
overdraft (only being available if the client doesn't have sufficient funds to complete a
transfer). Nubank, on the other hand, has a process analogous to that of a credit card
transaction (but with interest charged, unlike most credit card transactions in Brazil). We
believe Nubank's strategy could be appealing to customers because utilising their credit card
limit doesn't feel like taking on new debt. It is also convenient as PIX is often used for person-
to-person transfers where credit has historically not been available. Anecdotal feedback on
the user experience of Nubank's PIX Credito offering is positive, although we caution that the
product appears easily replicable.
Below we show the steps a client needs to take to use PIX Credito in Nubank's app. The first
four steps are essentially the same process as for a normal PIX transaction. However, in the
3
fifth step, the client selects "Credit Card" (Cartão de Crédito), and then chooses the number
of installments (up to 12x). As can be seen below (Chart 9), Nubank indicates the monthly
payment that would be charged. We find the whole process intuitive, and customers we've
spoken to say they are able to complete this in less than a minute.
Chart 4: Step 1: select PIX area, click on transfer Chart 5: Step 2: select amount to be transferred
Source: Nubank app, Autonomous Research Source: Nubank app, Autonomous Research
Chart 6: Step 3: select transaction payee Chart 7: Step 4: select which bank the money should be
transferred to
Source: Nubank app, Autonomous Research
Source: Nubank app, Autonomous Research
4
Chart 8: Step 5: select credit card option Chart 9: Step 6: select the number of installments
The app allows up to 12 monthly installments

Source: Nubank app, Autonomous Research Source: Nubank app, Autonomous Research
We asked a group of ten Nubank customers group to simulate a R$100 PIX Credito
transaction. Out of this group, only five had the option to use PIX Credito available in their
app. As shown in Chart 10, the interest rates implied by installment values varied significantly
between customers, with the APR on a single installment ranging from 65% to 189% in our
small sample. Our calculations take into account the point in each customer's billing cycle at
which each customer simulated the transaction - this is important because the length of time
between using PIX Credito and paying the first installment could vary between 8 and 38 days.
Chart 10: How implied APRs on PIX Credito transactions vary between customers
and by number of installments
200%
Client1 Client2 Client3 Client4 Client5
180%
160%
140%
120%
100%
80%
60%
40%
20%
0%
1x 3x 6x
We asked five Nubank clients to simulate a PIX Credito of R$100, and calculate the APR based on installment amounts and
billing dates
Source: Autonomous Research
Despite the wide range of interest rates, and with the caveat that we've only spoken to a small
number of users, PIX Credito appears cheaper than overdraft in most cases with interest rates
5
comparable with industry average rates charged on personal loans, as shown in Chart 11.
Chart 11: How APRs on PIX Credito compare with other consumer credit products
250% PIX Credito range PIX Credito average
200%
150%
100%
50%
0%
Credit card installments Overdraft Personal loans Payroll loans
Source: Brazilian Central Bank, Nubank app, Autonomous Research
PIX Credito is driving credit growth
Nubank breaks down its Brazilian credit card portfolio into four categories - transactional
balances, non-interest bearing installments, interest-bearing installments, and revolving. PIX
Credito balances are generally classed as "interest-bearing installments" (with the exception
of single-installment purchases which are classed as transactional). Nu does not break out
PIX credit balances separately and the interest-bearing installment category also includes the
balances of customers who have accepted an installment repayment plan after falling behind
with payments (as is required under Brazilian regulation).
Below we show the growth of interest-bearing installment balances within Nubank's Brazilian
credit card portfolio.
• Growth in interest-bearing installment balances began back in 2021, which we believe

coincides with Nubank introducing the option to pay boletos (which are often associated
with bill payments in Brazil) in installments using the credit card limit. Click here to see a
2021 Nubank blog post discussing the offering.
• Nubank's blog page (here) indicates that PIX Credito was launched during 3Q22. As shown
in Chart 12, the interest-bearing installment portfolio has increased from 7.7% of Nu's
Brazilian credit card as of June 2022 to 15.8% as of March 2023. By contrast, revolving
balances increased only modestly by 130bps to 7.4% of credit card balances in Brazil since
2Q22.
• During the 1Q23 earnings call, Guilherme Lago (Nubank's CFO), was questioned exactly
on the reason for the increase in the interest-bearing portion of credit card loans and
referenced both the PIX and boleto credit offerings: "I think we are basically managing to
develop new financing products and features through which consumers can actually now
gain financing capabilities through their credit cards, mostly related to PIX financing and
boleto financing. So these two features now account for the vast majority of this increase".
• As is clear from the chart we expect further rapid increases in the share of interest-bearing
installment balances over the coming quarters. However, we expect growth to slow
significantly from 2024 as client demand becomes saturated.
6
Chart 12: Nubank's interest bearing balance has increased materially since PIX
Credito was introduced
Revolving, % of total credit card Interest bearing installments, % of total credit card
35%
30%
25% PIX Credito is available

to Nu clients
20%
15%
10%
5%
0%
Revolving and interest bearing installments as percentage of total credit card balances, includes only Brazilian operations
Source: Company filings, Autonomous Research
Below in Table 1 we show our estimates of Nubank's new installment products (including PIX
Credito and boleto financing) as a percentage of total credit card balances.
• We start by calculating the ratio of interest-bearing installment card balances to revolving

balances for the industry. Applying this ratio to Nubank's portfolio allows us to calculate
interest-bearing installment balances associated with the installment repayment plans
offered to struggling borrowers (as is common practice in the industry), shown in row E
below.
• We are then able to calculate "excess interest-bearing installments" (in row G). These first
appeared in 3Q21, after Nubank launched boleto financing, and increased sharply from
3Q22, when Nubank began offering PIX Credito.
Table 1: Our estimates of balances for Nubank's new card installment products
(including PIX Credito)
2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22 4Q22 1Q23
A Industry revolving (% of total CC balance) 18% 15% 12% 13% 13% 13% 13% 14% 15% 16% 16% 14%
Industry interest bearing installments (%

B 11% 9% 8% 9% 9% 9% 8% 9% 9% 10% 9% 13%
of CC balance)
Interest bearing installments / revolving
C=B/A 60% 58% 64% 68% 69% 69% 66% 66% 64% 60% 60% 87%
ratio
D Nubank revolving balance - reported 9% 8% 6% 7% 5% 5% 6% 6% 6% 7% 7% 7%
Interest bearing installments - NU (@

E=DxC 5% 5% 4% 5% 3% 3% 4% 4% 4% 4% 4% 6%
industry mix)
F Nubank installments IBB - total reported 5% 4% 3% 3% 5% 5% 6% 8% 8% 10% 12% 16%
Excess interest bearing installments -

G=F-E 0% 0% 0% 0% 2% 1% 2% 4% 4% 6% 8% 10%
NU (new products)
Excess interest bearing installments - NU
- - - - 0.1 0.1 0.1 0.2 0.2 0.4 0.6 0.9
(new products) - U$bn
Includes only Nubank's Brazilian credit card operations

Source: Brazilian Central Bank, Company filings, Autonomous Research
As shown below, the percentage of interest-bearing installments in Nubank's credit card

portfolio has increased from below-industry levels prior to the launch of PIX Credito to far
higher levels. By contrast, this percentage has remained relatively stable at Itaú (the other
major banks don't provide a breakdown).
7
Chart 13: Interest bearing installment balances account for a much larger share of
Nubank's credit card portfolio following the launch of PIX Credito
18%
Nubank Itaú Industry
16%
14%
12%
10%
8%
6%
4%
2%
0%
2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22 4Q22 1Q23
Yields on card balances have declined somewhat
As Chart 14 shows, the yield (and spread) on Nubank's interest bearing credit card balances
has declined somewhat since 2021. We believe this reflects some mix shift away from
revolving balances, where interest rates are very high (typically > 400% on an annual basis),
towards installment products.
Chart 14: Yields on Nubank interest-bearing card balances have declined
Yield on credit card IBB, annualized Spread over CDI

100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22 4Q22 1Q23
PIX Credito is increasing credit card monetization
PIX Credito has been beneficial to yields from a total balance perspective given that it
increases the proportion of credit card balances on which interest income is charged. As can
be seen below, the annualized yield on total credit card balance increased to 18% in 1Q23
from 14% in 2Q22.
8
Chart 15: Yield on total credit card balance increased 420bps since PIX Credito was
launched
20%
Yield on total balance, annualized Spread over CDI
18%
16%
14%
12%
10%
8%
6%
4%
2%
0%
1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22 4Q22 1Q23
Source: Company filings, Autonomous Research
More than just an overdraft competitor

It's natural to think of PIX Credito being similar to overdraft. After all, the most obvious
reason to make such a transaction is when the client needs to transfer money and doesn't
have sufficient funds. However, PIX Credito's appeal seems broader than that of overdraft.
Anecdotally, one Nubank client told us : "I use PIX Credito quite often because I prefer to
concentrate all of my expenses in my credit card bill".
• In Chart 16 we show that our estimate of PIX Credito (and other new installment product)
balances as a percentage of Nubank deposits is now larger than industry overdraft
balances as a percentage of demand and savings deposits. Although we recognise that
industry data may not be directly comparable due to corporate deposits in the mix, we
believe this is an indication of PIX Credito's broader appeal.
• If we consider the industry's overdraft balance as the best estimate of the TAM (Chart
17), Nubank's market share would already have grown to 11.2% from 2.6%, since the
product was available (from 3Q22 to 1Q23). This is higher than Nubank's share in credit
cards (9.5% in 1Q23). However, we believe comparisons with overdraft underestimate the
opportunity.
Chart 16: PIX Credito as % of deposits was 2x higher Chart 17: PIX Credito represented a higher "share" of
than overdraft in 1Q23 overdraft in 1Q23 than Nubank's share in credit cards
7%
NU - PIX Credito* as % of deposits Industry - Overdraft as % of deposits 16% NU - PIX Credito market share as in overdraft NU - Creditr card market share
6%
14%
5% 12%
4% 10%
8%
3%
6%
2%
4%
1%
2%
0%
3Q22 4Q22 1Q23 0%
3Q22 4Q22 1Q23
*And other new card installments products Source: Brazilian Central Bank, Company filings, Autonomous Research
9
Below we show Nubank's market share in personal lending (excluding payroll) if we treat PIX
Credito as a personal lending product. On this basis, Nubank already had a personal lending
market share of 6.5% as of 1Q23, which is already approaching its market share of around
10% in credit card balances. We forecast this increasing to almost 17% by the end of 2026.
We believe that this is reasonable given the popularity of the product and our expectation that
Nubank will continue to expand its number of credit card users.
Chart 18: Nubank's market share in personal lending treating PIX Credito (and other
new card installment products) as a personal lending product
18%
Personal loans - share PIX Credito - share
16%
14%
12%
10%
8%
6%
4%
2%
0%
Credit will be critical to the product's success

Credit quality will be critical to the success (or failure) of PIX Credito and other similar
initiatives. Below we show cost of risk for Nubank's credit card portfolio calculated using both
total credit card balances and interest-bearing balances as the denominator.
• The very high cost of risk on interest-bearing balances stands out. Prior to the launch
of new products such as PIX Credito, customers usually only paid interest if they faced
financial difficulties because of the punitive rates applied on revolving balances. This meant
that the cost of risk on interest-bearing balances was very high.
• The lower cost of risk on total balances reflects that the majority of balances are non-
interest bearing balances and transactional in nature. Customers often use credit cards to
take advantage of interest-free installments and rewards (such as cashback offered by Nu's
premium Ultravioleta product).
• PIX Credito and other new installment products have their own credit profile, in between
that of transactional and revolving card balances. Customers using PIX Credito are taking
credit, but should present less risk than those with revolving credit card debt as a result
of financial distress. As shown in the chart below, the cost of risk on interest-bearing card
balances has decreased as PIX Credito has grown over recent quarters (as PIX Credito
balances are lower risk than revolvers). However, the cost of risk on total card balances has
increased (because PIX Credito is higher risk than transactional balances).
• As shown below, we model the annualized cost of risk on total credit card balances
declining from 15% in 1Q23 to 10% in 2026. This reflects forecast growth in interest-
bearing card balances slowing from 93% in 2023 to 23% in 2026 because provisioning is
front-loaded until the IFRS expected loss methodology. However, our forecasts also bake in
10
the assumption that PIX Credito balances perform significantly better than interest-bearing
balances.
Chart 19: We forecast an improvement in credit card cost of risk as installment

products increase
90%
Cost of risk - total credit card balance
80% Cost of risk - credit card interest-bearing balance
70%
60%
50%
40%
30%
20%
10%
0%
Source: Company releases, Autonomous Research
We have little visibility into the credit profile of these new products. Earnings could be
significantly worse (or better) than our estimates if credit differs from our forecasts. If
credit card cost of risk were to remain unchanged at the 1Q23 level of 15%, our 2026E
net income estimate would be 26% lower, as shown in the table below. A cost of risk of
20% (equal to the 1Q23 cost of risk on personal loans) would imply 52% downside.
Table 2: Sensitivity of our 2026E adjusted net income to credit card cost of risk
assumption
Cost of risk Adjusted net income ∆% vs base case (10%) ∆% vs consensus
$mn
5.0% 3,846 26% 22%
7.5% 3,447 13% 9%
10.0% 3,049 0% -3%
12.5% 2,651 -13% -16%
15.0% 2,253 -26% -29%
17.5% 1,855 -39% -41%
20.0% 1,457 -52% -54%
Cost of risk only for credit card products, as % of average loan balance
Source: Visible Alpha, Autonomous Research
Changes to our earnings estimates

We update our Nubank model to better incorporate the impact of PIX Credito, and take the
opportunity to give our broader assumptions a refresh. The changes to our estimates are
summarized in the table below:
• We raise our net interest income estimates to capture faster growth in interest-bearing
installment credit card balances. This is partly offset by higher provisioning estimates given
that these loans are inherently riskier than transactional card balances.
• We reduce our net fee income forecast in 2024E and 2025E. We had been assuming a
substantial ramp-up in growth here, but Nubank's progress in fee products (such as its
11
investment offering and secured loan origination through third parties) has been slower
than we anticipated.
• We make a number of tweaks in forecast opex. We reduce forecast share-based

compensation within total expenses in 2023 (which results in a lower adjusted net income
estimate) and slowing the pace of overall opex growth in 2024.
Overall, we reduce adjusted EPS in 2023 by 8% (given the share-based comp adjustment
noted above) but raise by 4% in both 2024 and 2025 to reflect our increased revenue
estimates.
Table 3: Changes to our Nubank estimates

Old vs New estimates 2023E 2024E 2025E
(U$mn) Old New ∆% Old New ∆% Old New ∆%
Interest income 5,709 5,800 2% 7,332 7,644 4% 8,535 9,014 6%
Interest expenses -1,961 -1,964 0% -1,971 -1,981 0% -1,831 -1,843 1%
Net interest income 3,748 3,836 2% 5,361 5,663 6% 6,703 7,171 7%
Net fee income 1,273 1,330 4% 1,817 1,721 -5% 2,166 1,955 -10%
Net revenues 5,022 5,165 3% 7,178 7,384 3% 8,869 9,126 3%
Provision expenses -2,107 -2,139 2% -2,725 -2,757 1% -3,172 -3,221 2%
Operating expenses -1,815 -1,851 2% -2,580 -2,387 -8% -2,668 -2,739 3%
Income tax -444 -475 7% -655 -784 20% -1,060 -1,108 5%
Net income 656 701 7% 1,217 1,456 20% 1,969 2,058 5%
Adjusted net income 969 891 -8% 1,595 1,667 4% 2,231 2,330 4%
Adjusted EPS 0.20 0.18 -8% 0.32 0.33 4% 0.43 0.45 4%
Source: Autonomous Research
Below we compare our refreshed estimates with Visible Alpha consensus. We are virtually
in line on adjusted net income in 2023, ahead in 2024 (due to higher forecast net interest
income), but in line in 2025.
Table 4: How our new estimates compare with consensus

Autonomous vs 2023E 2024E 2025E
Consensus (U$mn) Auto Cons. ∆% Auto Cons. ∆% Auto Cons. ∆%
Interest income 5,800 5,728 1% 7,644 7,182 6% 9,014 8,873 2%
Interest expenses -1,964 -1,885 4% -1,981 -1,935 2% -1,843 -2,142 -14%
Net interest income 3,836 3,843 0% 5,663 5,247 8% 7,171 6,731 7%
Fee income 1,569 1,634 -4% 2,087 2,287 -9% 2,449 3,061 -20%
Fee expenses -240 -244 -2% -366 -308 19% -494 -372 33%
Net fee income 1,330 1,389 -4% 1,721 1,979 -13% 1,955 2,689 -27%
Net revenues 5,165 5,233 -1% 7,384 7,226 2% 9,126 9,420 -3%
Provision expenses -2,139 -2,213 -3% -2,757 -2,872 -4% -3,221 -3,533 -9%
Customer support -468 -489 -4% -506 -626 -19% -549 -718 -24%
Marketing expenses -117 -139 -16% -185 -193 -5% -183 -307 -41%
Adminstrative expenses -1,066 -1,179 -10% -1,433 -1,484 -3% -1,696 -1,648 3%
Other expenses -200 -195 3% -264 -223 18% -311 -215 45%
Operating expenses -1,851 -2,001 -8% -2,387 -2,527 -6% -2,739 -2,888 -5%
Income tax -475 -379 25% -784 -640 23% -1,108 -1,038 7%
Net income 701 655 7% 1,456 1,183 23% 2,058 1,938 6%
Adjusted net income 891 879 1% 1,667 1,507 11% 2,330 2,334 0%
Source: Visible Alpha, Autonomous Research
We raise our price target from $6.10 to $7.70 as we increase our 2026E target P/E multiple
to 20x from 16x previously. This reflects the recent re-rating of profitable growth stocks.
Some top quality EM banks already trade at even higher multiples (on forward consensus
earnings) such as Kotak Mahindra in India on 26x and Bank Central Asia in Indonesia on 24x,
although we believe that it would be overly aggressive to apply such a target multiple to
Nubank given the relatively developed nature of the Brazilian consumer finance market.
12
Table 5: We set our price target at $7.70

$bn 2023E 2026E
Net income 0.7 2.8
Target P/E 20x
Market value at target P/E 56.0
Equity book value 12.1
Implied PBV 4.6x
ROE 26.2%
Cost of equity 13.5%
Periods to discount 3.50
Discounted present value (U$bn) 35.9
Price per share (U$) $7.70
Current share price $7.96
Upside/Downside -3%
Shares outstanding (mn) 4,671
Source: Autonomous Research, Bloomberg
13
AUTONOMOUS TICKER TABLE

3 Jul 2023 Adjusted EPS Adjusted P/E (x)
Closing Price
Ticker Rating Price Target 2022A 2023E 2024E 2022A 2023E 2024E
NU US N USD 7.96 7.70 USD 0.04 0.18 0.33 181.7 44.4 24.2
OLD 6.10 0.20 0.32
IBOV 119,076.40 -- -- -- -- -- --
PRICE TARGET CHANGE / ESTIMATE CHANGE IN BOLD
OP - Outperform, N - Neutral, UP - Underperform, NR - Not Rated, CS - Coverage Suspended
Source: Bloomberg, Autonomous estimates and analysis.
14
DISCLOSURE APPENDIX
I. REQUIRED DISCLOSURES
Autonomous Research US is a unit within Sanford C. Bernstein & Co., LLC , a broker-dealer registered with the U.S. Securities and
Exchange Commission and a member of the Financial Industry Regulatory Authority (www.finra.org) and the Securities Investor
Protection Corporation (see www.sipc.org). When this report contains an analysis of debt securities, such report is intended for
institutional investors and is not subject to all the independence and disclosure standards applicable to debt research for retail
investors under the FINRA rules.
PRICE TARGET DERIVATION AND VALUATION METHODOLOGY
To derive a fair value, we use a common valuation approach for each sector/sub-sector: for banks, insurers, and mortgage
originators we use a DCF based sum-of-the-parts valuation; for payment and processing companies, mortgage tech companies,
and traditional asset managers we use a target P/E approach; for alternative asset managers we take the average of a fee stream
sum-of-the-parts and an "in ground" and un-invested capital value model. These approaches to fair values drive the price target
exactly in most circumstances. Only where there is an identifiable exogenous event that could occur on a twelve-month time-
frame can a target price diverge from the fair value (e.g. a potential take-over from an identifiable bidder or a potential capital
impact from a possible regulatory change).
RISKS
Nubank
Main risks are: (i) competitive pressure driving interest rates and interchange fees down, (ii) regulatory changes impacting
profitability, and (iii) improvement in Brazilian macro environment with lower delinquency rates driving profitability up
RATINGS DEFINITIONS, BENCHMARKS AND DISTRIBUTION
Bernstein brand
The Bernstein brand rates stocks based on forecasts of relative performance for the next 6-12 months versus the S&P 500 for
stocks listed on the U.S. and Canadian exchanges, versus the Bloomberg Europe Developed Markets Large & Mid Cap Price
Return Index (EDM) for stocks listed on the European exchanges (except for Russian companies), versus the Bloomberg Emerging
Markets Large & Mid Cap Price Return Index (EM) for Russian companies and stocks listed on emerging markets exchanges
outside of the Asia Pacific region, versus the Bloomberg Japan Large & Mid Cap Price Return Index USD (JP) for stocks listed on
the Japanese exchanges, and versus the Bloomberg Asia ex-Japan Large & Mid Cap Price Return Index (ASIAX) for stocks listed
on the Asian (ex-Japan) exchanges -unless otherwise specified.
The Bernstein brand has three categories of ratings:
• Outperform: Stock will outpace the market index by more than 15 pp
• Market-Perform: Stock will perform in line with the market index to within +/-15 pp
• Underperform: Stock will trail the performance of the market index by more than 15 pp
Coverage Suspended applies when coverage of a company under the Bernstein research brand has been suspended. Ratings and
price targets are suspended temporarily. Previously issued ratings and price targets are no longer current and should therefore
not be relied upon.
Not Rated: The stock Rating, Target Price and/or estimates (if any) have been suspended temporarily.
Autonomous brand
The Autonomous brand rates stocks as indicated below. As our benchmarks we use the Bloomberg Europe 500 Banks And
Financial Services Index (BEBANKS) and Bloomberg Europe Dev Mkt Financials Lrg & Mid Cap Price Ret Index EUR (EDMFI)
index for European banks, the Bloomberg Europe 500 Insurance Index (BEINSUR) for European insurers, the S&P 500 and S&P
15
Financials for US banks coverage, S5LIFE for US Insurance, the S&P Insurance Select Industry (SPSIINS) for US Non-Life Insurers
coverage, and Ibovespa Brasil Sao Paulo Stock Exchange Index (IBOV) for Brazil and Hang Seng H-FIN (HSHFI-HK) index for China
banks and insurers. Ratings are stated relative to the sector (not the market).
The Autonomous brand has three categories of ratings:
• Outperform (OP): Stock will outpace the relevant index by more than 10 pp
• Neutral (N): Stock will perform in line with the relevant index to within +/-10 pp
• Underperform (UP): Stock will trail the performance of the relevant index by more than 10 pp
Coverage Suspended (CS) applies when coverage of a company under the Autonomous research brand has been suspended.
Ratings and price targets are suspended temporarily. Previously issued ratings and price targets are no longer current and should
therefore not be relied upon.
Not Rated: The stock Rating, Target Price and/or estimates (if any) have been suspended temporarily.
Those denoted as ‘Feature’ (e.g., Feature Outperform FOP, Feature Under Outperform FUP) are our core ideas. Not Rated (NR) is
applied to companies that are not under formal coverage.
For both brands, recommendations are based on a 12-month time horizon.
DISTRIBUTION OF RATINGS/INVESTMENT BANKING SERVICES

Rating Market Abuse Regulation (MAR) and Count Percent Count* Percent*
FINRA Rule 2241 classification
Outperform BUY 383 49.61% 0 0.00%
Market-Perform (Bernstein Brand)

HOLD 265 34.33% 0 0.00%
Neutral (Autonomous Brand)
Underperform SELL 124 16.06% 0 0.00%
* These figures represent the number and percentage of companies in each category to whom Bernstein and Autonomous
provided investment banking services.
As of Jul 05 2023. All figures are updated quarterly and represent the cumulative ratings over the previous 12 months.
PRICE CHARTS/ RATINGS AND PRICE TARGET HISTORY
Nubank (NU US) Rating History for Autonomous as of 07/03/2023

OP:$11.40 OP:$12.80 OP:$12.70 OP:$5.30 I:OP:$5.30 N:$4.30 N:$4.20 N:$5.30 N:$5.10 N:$6.00 N:$6.20
01/05/2022 03/07/2022 04/22/2022 05/18/2022 05/19/2022 07/06/2022 07/25/2022 08/17/2022 11/01/2022 11/16/2022 12/01/2022
$14
$12
$10
$8
$6
$4
$2
Oct 20 Jan 21 Apr 21 Jul 21 Oct 21 Jan 22 Apr 22 Jul 22 Oct 22 Jan 23 Apr 23 Jul 23
N:$5.20 N:$5.60 N:$6.10
01/31/2023 02/20/2023 05/17/2023
Closing Price Price Target
Outperform (OP); Neutral (N); Underperform (UP); Coverage Suspended (CS); Not Rated (NR)
16
OTHER MATTERS
It is at the sole discretion of the Firm as to when to initiate, update and cease research coverage. The Firm has established,
maintains and relies on information barriers to control the flow of information contained in one or more areas (i.e. the private side)
within the Firm, and into other areas, units, groups or affiliates (i.e. public side) of the Firm.
The legal entity(ies) employing the analyst(s) listed in this report can be determined by the country code of their phone number,
as follows:
+1 Sanford C. Bernstein & Co., LLC
+44 Bernstein Autonomous LLP
+353 Sanford C. Bernstein Ireland Limited
+91 Sanford C. Bernstein (India) Private Limited
+852 Sanford C. Bernstein (Hong Kong) Limited 盛博香港有限公司
+65 Sanford C. Bernstein (Singapore) Private Limited
+81 Sanford C. Bernstein Japan KK
CERTIFICATION
Each research analyst listed in this report, who is primarily responsible for the preparation of the content of this report, certifies
that all of the views expressed in this publication accurately reflect that analyst's personal views about any and all of the subject
securities or issuers and that no part of that analyst's compensation was, is, or will be, directly or indirectly, related to the specific
recommendations or views in this publication.
II. OTHER IMPORTANT INFORMATION AND DISCLOSURES
References to "Bernstein" or the “Firm” in these disclosures relate to the following entities: Sanford C. Bernstein & Co., LLC,
Bernstein Autonomous LLP, Sanford C. Bernstein Limited (for dates prior to January, 1, 2021), Autonomous Research LLP (for
dates between April 1, 2019 and December 31, 2020), Sanford C. Bernstein (Hong Kong) Limited 盛博香港有限公司, Sanford
C. Bernstein (Canada) Limited, Sanford C. Bernstein (India) Private Limited (SEBI registration no. INH000006378) and Sanford C.
Bernstein (Singapore) Private Limited, which is a licensed entity under the Securities and Futures Act and registered with Company
Registration No. 20213710W.
Separate branding is maintained for “Bernstein” and “Autonomous” research products.
• Bernstein produces a number of different types of research products including, among others, fundamental analysis and
quantitative analysis, under both the “Autonomous” and “Bernstein” brands. Recommendations contained within one type of
research product may differ from recommendations contained within other types of research products, whether as a result of
differing time horizons, methodologies or otherwise. Furthermore, views or recommendations within a research product issued
under one brand may differ from views or recommendations under the same type of research product issued under the other
brand. The Research Ratings System for the two brands and other information related to those Rating Systems are included
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• Each operates as a separate business unit within the following entities: Sanford C. Bernstein & Co., LLC, Sanford C. Bernstein
(Hong Kong) Limited 盛博香港有限公司 and Bernstein Autonomous LLP. For information relating to “Autonomous” branded
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Information related to the acquisition of Autonomous Research:
• On and as of April 1, 2019, AllianceBernstein L.P. acquired Autonomous Research. As a result of the acquisition, the research
activities formerly conducted by Autonomous Research US LP and Autonomous Research Asia Limited were assumed by
17
Sanford C. Bernstein & Co., LLC and Sanford C. Bernstein (Hong Kong) Limited盛博香港有限公司, respectively. Both entities
continue to publish research under the Autonomous brand.
• References to “Autonomous” in these disclosures relate to the Autonomous Research LLP and, with reference to dates prior
to April 1, 2019, to Autonomous Research US LP and Autonomous Research Asia Limited, and, with reference to April 1, 2019
onwards, the Autonomous Research US unit and separate brand of Sanford C. Bernstein & Co., LLC and the Autonomous
Research Asia unit and separate brand of Sanford C. Bernstein (Hong Kong) Limited 盛博香港有限公司, collectively.
Information related to the reorganization of Sanford C. Bernstein Limited and Autonomous Research LLP:
• On and after close of business on December 31, 2020, as part of an internal reorganisation of the corporate group, Sanford C.
Bernstein Limited transferred its business to its affiliate Autonomous Research LLP. Subsequent to this transfer, Autonomous
Research LLP changed its name to Bernstein Autonomous LLP. As a result of the reorganisation, the research activities formerly
conducted by Sanford C. Bernstein Limited were assumed by Bernstein Autonomous LLP, which is authorised and regulated by
the Financial Conduct Authority (FRN 500498) and now publishes research under the Bernstein Research Brand.Please note
that all price targets, recommendations and historical price charts are unaffected by the transfer of the business from Sanford
C. Bernstein Limited and have been carried forward unchanged to Bernstein Autonomous LLP. You can continue to find this
information on the Bernstein website at www.bernsteinresearch.com.
Analysts are compensated based on aggregate contributions to the research franchise as measured by account penetration,
productivity and proactivity of investment ideas. No analysts are compensated based on performance in, or contributions to,
generating investment banking revenues.
This report has been produced by an independent analyst as defined in Article 3 (1)(34)(i) of EU 296/2014 Market Abuse
Regulation (“MAR”).
Where this material contains an analysis of debt product(s), such material is intended only for institutional investors and is not
subject to the independence and disclosure standards applicable to debt research prepared for retail investors.
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To our readers in the United States: Sanford C. Bernstein & Co., LLC, a broker-dealer registered with the U.S. Securities and
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18
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19
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20
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5 July 2023 Nubank (NU US) Banks

Price: USD 7.96

NUBANK Geoffrey Elliott, CFA

PIX Credito - Good for Nu gelliott@autonomous.com

14.2% of total interest-bearing balances. 07/22 10/22 01/23 04/23 07/23

NU US Ibovespa Brasil Sao Paulo Stock Exchange Index

PIX Credito - Good for Nu 5 July 2023

PIX - A brief recap

Chart 1: PIX has rapidly gained popularity among Brazilians

Source: Brazilian Central Bank, Autonomous Research

Chart 2: PIX is dominated by P2P and B2B transactions

P2P and B2B

PIX Credito - Good for Nu 5 July 2023

Source: ABECS, Brazilian Central Bank, Autonomous Research

Introducing PIX Credito

PIX Credito - Good for Nu 5 July 2023

Source: Nubank app, Autonomous Research

Source: Nubank app, Autonomous Research

PIX Credito - Good for Nu 5 July 2023

The app allows up to 12 monthly installments

PIX Credito - Good for Nu 5 July 2023

Source: Brazilian Central Bank, Nubank app, Autonomous Research

PIX Credito is driving credit growth

• Growth in interest-bearing installment balances began back in 2021, which we believe

PIX Credito - Good for Nu 5 July 2023

25% PIX Credito is available

• We start by calculating the ratio of interest-bearing installment card balances to revolving

Industry interest bearing installments (%

D Nubank revolving balance - reported 9% 8% 6% 7% 5% 5% 6% 6% 6% 7% 7% 7%

Interest bearing installments - NU (@

F Nubank installments IBB - total reported 5% 4% 3% 3% 5% 5% 6% 8% 8% 10% 12% 16%

Excess interest bearing installments -

Includes only Nubank's Brazilian credit card operations

As shown below, the percentage of interest-bearing installments in Nubank's credit card

PIX Credito - Good for Nu 5 July 2023

Source: Brazilian Central Bank, Company filings, Autonomous Research

Yields on card balances have declined somewhat

Chart 14: Yields on Nubank interest-bearing card balances have declined

Yield on credit card IBB, annualized Spread over CDI

Source: Brazilian Central Bank, Company filings, Autonomous Research

PIX Credito is increasing credit card monetization

PIX Credito - Good for Nu 5 July 2023

Source: Company filings, Autonomous Research

More than just an overdraft competitor

PIX Credito - Good for Nu 5 July 2023

Source: Brazilian Central Bank, Company filings, Autonomous Research

Credit will be critical to the product's success

PIX Credito - Good for Nu 5 July 2023

Chart 19: We forecast an improvement in credit card cost of risk as installment

Source: Company releases, Autonomous Research

Changes to our earnings estimates

PIX Credito - Good for Nu 5 July 2023

• We make a number of tweaks in forecast opex. We reduce forecast share-based

Table 3: Changes to our Nubank estimates

Source: Autonomous Research

Table 4: How our new estimates compare with consensus

Source: Visible Alpha, Autonomous Research

PIX Credito - Good for Nu 5 July 2023

Table 5: We set our price target at $7.70

Source: Autonomous Research, Bloomberg

PIX Credito - Good for Nu 5 July 2023

AUTONOMOUS TICKER TABLE

PIX Credito - Good for Nu 5 July 2023